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Are small family firms financially sophisticated?

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  • Di Giuli, Alberta
  • Caselli, Stefano
  • Gatti, Stefano

Abstract

We study the drivers of financial sophistication in small family firms. Sophistication is defined as the use of non-basic financial products such as options, swaps, debt restructuring, and mergers and acquisitions (M&A) advisory services. Our analysis is based on a unique dataset with detailed information on 187 Italian family firms. We find that the main drivers of financial sophistication are: (1) the generation that currently owns the firm; (2) the presence of a non-family CFO; and (3) the existence of a non-family shareholder. We analyze the impact of these factors on the following four classes of non-basic financial products: corporate finance, cash management, corporate lending and risk management. Our results can be used to determine the characteristics of financially sophisticated family firms and whether their corporate governance and ownership structure increase the use of non-basic financial products.

Suggested Citation

  • Di Giuli, Alberta & Caselli, Stefano & Gatti, Stefano, 2011. "Are small family firms financially sophisticated?," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2931-2944, November.
    • Handle: RePEc:eee:jbfina:v:35:y:2011:i:11:p:2931-2944
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    7. Moudine, Chourouk & El Khattab, Younes, 2016. "Banking financing and credit risk: Case of the Sme's segment in Morocco," MPRA Paper 92686, University Library of Munich, Germany.
    8. Stefano Caselli & Alberta Di Giuli, 2010. "Does the CFO matter in family firms? Evidence from Italy," The European Journal of Finance, Taylor & Francis Journals, vol. 16(5), pages 381-411.
    9. Anneleen Michiels & Jelle Schepers & Pieter Vandekerkhof & Alessandro Cirillo, 2021. "Leasing as an Alternative Form of Financing within Family Businesses: The Important Advisory Role of the Accountant," Sustainability, MDPI, vol. 13(12), pages 1-17, June.
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    16. Lutz, Eva & Schraml, Stephanie & Achleitner, Ann-Kristin, 2010. "Loss of control vs. risk reduction: decision factors for hiring non-family CFOs in family firms," CEFS Working Paper Series 2010-04, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).

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